The Lord Chancellor: Leave of Absence

Lord Falconer of Thoroton: My Lords, before business begins, may I take the opportunity to inform the House that I will be undertaking a ministerial visit to Northern Ireland and Edinburgh on Tuesday, 25 October? Accordingly, I trust that the House will grant me leave of absence.

Electricity Generation

Lord Dixon-Smith: asked Her Majesty's Government:
	Whether the recent increase in oil prices has led to an increase in the use of coal to generate electricity in the United Kingdom.

Lord McKenzie of Luton: My Lords, the share of UK total electricity supplied from gas was two percentage points lower during the first half of 2005 than in the first half of 2004, while coal's share increased by one percentage point. That change in the UK generation mix was attributable to the rise in the price of natural gas relative to coal, which was largely the result of higher oil prices.

Lord Dixon-Smith: My Lords, I thank the Minister for his informative Answer. It is an unfortunate reality that rising coal use increases carbon dioxide emissions, which have an adverse affect on global temperatures. It is a classic case of a situation in which the short-term interests of electricity generators are in conflict with the long-term need to save on carbon emissions. Can the Minister tell the House whether the Government give priority to the short term or the long term?

Lord McKenzie of Luton: My Lords, the noble Lord is right: other things being equal, the increased attractiveness of coal as a fuel for generating electricity tends to result in more CO2 emissions. Typically, coal is twice as carbon-intensive per megawatt as gas. However, that tendency will be ameliorated and offset over time by the UK's participation in the EU emissions trading scheme. That is important with regard to the long term. The White Paper in 2003 set out the framework for a long-term energy policy, and the emissions trading scheme is important in that context in ensuring that carbon abatement is achieved in the most cost-effective way.

Lord Tomlinson: My Lords, does my noble friend agree that the figures that he gave us are bad news indeed for our Kyoto obligations and that there is no evidence that we should be optimistic about the target for non-renewables being met? In those circumstances, can he say anything further about the Government's policy on the nuclear generation of electricity? If he cannot, will he undertake that his noble friend will say something of substance in the debate on Thursday?

Lord McKenzie of Luton: My Lords, I thank my noble friend for that question. He has been steadfast in pursuing the issue. With regard to Kyoto, it is clear that we are on course to meet and exceed our obligations under that agreement. Progress has been made on renewables. I think that there has been an increase of 9 per cent in capacity, just between 2003 and 2004. However, there are significant challenges ahead.
	The Government's policy on energy was set out in the 2003 White Paper. It focuses on the importance of energy efficiency and renewable energy sources. We acknowledge that nuclear power is a source of carbon-free electricity, but there are significant issues relating to cost and the handling of waste.
	The Prime Minister has already announced that we will be publishing proposals on energy policy next year and has made it clear that issues of climate change and our reliance on imported energy supplies necessitate an assessment of all options for future energy policy, including civil nuclear power, renewables and clean coal technology. Issues of more substance may come forward in the review and possibly in the debate on Thursday.

Lord Redesdale: My Lords, can the Minister say—

Lord Peyton of Yeovil: My Lords—

Lord Rooker: My Lords, it is the turn of the Liberal Democrats.

Lord Redesdale: My Lords, the Minister has said that nuclear fuel is carbon free. However, even with nuclear, there is—and I hope that he mentions this in the debate on Thursday—a massive carbon footprint in the mining of a fossil fuel. Can he say when on present trends wind power will be cheaper than oil, coal or gas?

Lord McKenzie of Luton: My Lords, I agree with the noble Lord on his first point about the footprint. I do not have data on the cost of wind power, but I should be happy to write to him with such information as we have. But I think that we should celebrate the fact that there have been advances, particularly in on-shore wind power, which is helping to tackle the challenges that we face.

Lord Lawson of Blaby: My Lords—

Lord Peyton of Yeovil: My Lords, how long are the Minister and the Government he represents going to be content to dither and to waste time with meaningless phrases such as "Keeping the nuclear option open" when they are doing absolutely nothing to do so?

Lord McKenzie of Luton: My Lords, I reject that assertion. A lot of research is being conducted into a whole field of issues relating to energy policy. As I said earlier, we have set down a very clear framework within which the industry can operate and make its long-term investment decisions. As for nuclear energy, the position as set out in the White Paper will be kept under review and considered as part of the 2006 exercise.

Lord Lawson of Blaby: My Lords—

Lord Taylor of Blackburn: Perhaps I may rephrase the question of the noble Lord, Lord Peyton. Is my noble friend aware that many people in the energy industry are very disturbed because of the changes that have taken place since the 2003 White Paper? We do not know which way we are going. It is all very well for the Prime Minister to say that something will be done next year, but we want to know this year whether we should invest in one direction or the other.

Lord McKenzie of Luton: My Lords, the framework within which business can make its investment decisions was set down in 2003 and has not changed. Clearly that policy, as the policy document itself made clear, will not pick up every issue and every item that will need to be addressed over a period of 20 years or more. However, given the issues of security, importation of supplies and the increasing challenges of climate change, it is absolutely right that we continue to modify and keep abreast of such developments. That is what the exercise is about. It is not work that will be undertaken next year; it is something that will be forthcoming next year as a result of the ongoing review and implementation of the policy that is in place.

Lord Lawson of Blaby: My Lords—

Lord Rooker: My Lords, we are in the eighth minute and we must move on. However, we also have the fourth Question on the Order Paper.

Israel and Palestine

Lord Phillips of Sudbury: asked Her Majesty's Government:
	Whether they propose to revive the road map to peace in the Middle East, in the light of Israel's continuing expansion and consolidation of settlements in the West Bank; and, if so, what steps they propose to take.

Lord Triesman: My Lords, the road map remains the best way forward in the Middle East peace process. Following the success of disengagement, it is vital for Israel and the Palestinian Authority to make progress on their road map commitments, including an end to Israeli settlement construction. On 20 September the quartet called on both sides to renew action on their road map obligations and avoid actions which prejudice final status negotiations. We are working with the quartet and the parties to re-energise the road map.

Lord Phillips of Sudbury: My Lords, I am grateful to the Minister for his reply, but is that really sufficient in the light of the fact that, this year, the Israelis have moved more than 14,000 settlers into the West Bank compared with the 8,500 they withdrew from Gaza, and have expropriated more land around east Jerusalem than they yielded up at Gaza? Surely the truth is that all this undermines Abu Mazen's position and creates a huge backlash of Palestinian and indeed Muslim opinion. When is the Prime Minister going effectively to honour his repeated commitment to the road map?

Lord Triesman: My Lords, the building of settlements, as anybody who looks at the map can see, makes it extremely difficult to create a contiguous authority for the Palestinian people east of Jerusalem. We have said so repeatedly and we will continue to say so. We have made these representations on a very large number of occasions, together with others in the quartet. All those who are interested in a peaceful resolution should look at the achievements that have come from the disengagement and build on them. The reality is that it is a very long, hard haul, and everybody must try to take the maximum advantage of any success and any development.

Lord Gilmour of Craigmillar: My Lords, surely the Minister realises that the road map is now largely a device for allowing Mr Sharon sufficient time to go on building his illegal settlements in his apartheid rage, so why do we go on talking about it? Surely action is needed and not just talk.

Lord Triesman: My Lords, the Middle East's problems will be resolved by talk; they will certainly not be resolved by any of the methods that are being adopted in the region. Some of the building programmes have been halted, largely because of pressures that have been brought to bear by members of the quartet. That gives a little bit of space for further development in the West Bank. That has to be the objective. There are no silver bullets for suddenly resolving this issue by means other than negotiation.

Lord Wright of Richmond: My Lords—

Lord Winston: My Lords—

Lord Rooker: My Lords, there is plenty of time.

Lord Winston: My Lords—

Lord Wright of Richmond: My Lords, perhaps I may remind the House of the gracious Speech of 17 May this year, in which Parliament was told that peace in the Middle East would remain one of the Government's highest priorities. In the light of that, what response has the quartet had from the Israeli Government to its call? Does the Minister agree that the continuing build-up of settlements not only prejudices any chance of a peaceful settlement but directly contravenes the commitments to which the Israelis have signed up?

Lord Triesman: My Lords, the building and extension of settlements is plainly contrary to the arrangements under the first phase of the road map. It is also true that breaches of security and attacks on Israel are contrary to the provisions of the road map. There are difficulties on both sides. The withdrawal from Gaza and from some parts of the northern West Bank has provided a window of opportunity for parallel development. That is what the Government must seize on, just as all members of the quartet agree they must.

Lord Winston: My Lords, I apologise to the noble Lord, Lord Wright, for interrupting him. I misheard. Does the Minister agree that the use of the word "apartheid" is both offensive and inaccurate, given that many Arabs live at peace within the state of Israel and are full citizens of that state?

Lord Triesman: My Lords, I agree with that, and I regret that I have to say it. The truth is that it is the kind of language which makes the peace process almost impossible. We would all do a lot better if we were a bit more cautious in what we said.

Lord Howell of Guildford: My Lords, if there is to be a next step in the road map process—I think we all have to concede that it looks somewhat stalled at the moment—the halt in the expansion of Israeli settlements and the dismantling of illegal Jewish hilltop settlements are essential. But does the Minister agree that, on the Palestinian side, it would be very valuable if the Palestinian authorities could ensure that the candidates in their elections and local elections break their links with the armed militias so that candidates are not using armed methods and violent means? That would at least be in accord with the Oslo principles and might help the process inch forward.

Lord Triesman: My Lords, I agree with that. There is no place for the gun in civilised politics. I am glad to report to the House that, in a meeting between President Abbas and President Bush in Washington recently, the question of reining in terrorists and making sure that security was improved was one of the fundamental issues, and there was a renewal of the undertakings in that regard given in London in March. All sides have to make certain now that they do nothing that prejudices the prospects for the road map. Those prospects are difficult at any time. Anything that makes them more so must be wholly unacceptable to this House.

Lord Wedderburn of Charlton: My Lords, with your Lordships' leave, I will presage my question by saying what a joy it is to see how the House can behave in a successful self-regulatory manner, without the need for intervention from either the Front Bench or the Woolsack.
	Does my noble friend not agree that Israel, especially in the evacuation from Gaza, has made several steps of great value to the process towards peace, which we all desire? Does he not also agree that it would be helpful if the Palestinian Authority discouraged the participation in elections of those who come from groups such as Hamas or Hezbollah, whose programme in Arabic is clear: the total abolition of the state of Israel and its people?

Lord Triesman: My Lords, the decision to move back from Gaza was brave. I compliment the Israeli Government on the success with which they did it. It was done carefully, and in a way that meant that those who resisted moving from Gaza were dealt with in a civilised yet firm way. It is important that that is reciprocated. The truth is that there are people in the Palestinian enclave who still advocate violence and do not accept Israel's right to exist. So long as they pursue those politics it is difficult to see how the Palestinian Authority can act with the authority it needs. That is precisely why building some effort towards peace on the basis of what we have must remain a priority.

Firearms: Weapons of Historic Interest

Lord Clement-Jones: asked Her Majesty's Government:
	Whether they have considered the potential impact of the Violent Crime Reduction Bill on the collection and display of weapons of national historical interest and on re-enactment of their use.

Baroness Scotland of Asthal: My Lords, we are aware that firearms laws must balance public safety considerations and specific interests. We have therefore tabled amendments to the Bill that would allow a person to manufacture, modify, sell or import realistic imitation firearms for the purposes of a museum or gallery; for TV, film or theatrical productions; or for historical re-enactments. We have also tabled an amendment that would exempt deactivated firearms and certain antiques from the definition of a realistic imitation firearm.

Lord Clement-Jones: My Lords, I thank the Minister for that reply. I entirely agree with her that a balanced approach must be taken, and I welcome the amendments that have been tabled since I put this question down, although I would not claim cause and effect. I urge the Minister to reconsider the position of private museums, which are not caught by these two amendments and will therefore still have a problem with deactivated weapons. Many such museums are extremely popular and have had up to 1 million visitors during the course of their existence. In many cases they are also a valuable source of weapons for public museums, as private collectors often bequeath them their collections.

Baroness Scotland of Asthal: My Lords, I hoped the answer I gave the noble Lord would give him the pleasure it obviously has, but I say further that these are issues we are going to consider. We will be able to do so as they go through Committee. The purpose of the amendments we have brought forward is to deal with the genuine concern in theatrical and other issues. There is an opportunity for us to look further at those matters.

Gas Supplies

Lord Ezra: asked Her Majesty's Government:
	Whether, in the light of recent forecasts of a harsh winter, gas supplies will be adequate to meet the demands of both domestic and industrial consumers.

Lord Davies of Oldham: My Lords, in its recently published Outlook Report, National Grid advised that even in the severest of winters the market can maintain supplies of gas by a combination of actions to reduce demand. It further advised that under all credible scenarios the energy market will be able to deliver supplies of gas to domestic consumers.

Lord Ezra: My Lords, I thank the noble Lord for that assurance, as far as domestic consumers are concerned. But what is going to happen to industrial consumers, including power stations, which supply the domestic market? If we were to have the recurrence of the sort of conditions that we had in 1963, for example, what level of cut would there be in the industrial market, bearing in mind that the level of gas storage in this country is very much lower than it is in continental countries? Secondly, does this not indicate that, as we are now moving from a position of independence of energy supply to dependence on imports, it is now more urgent than ever to take a long-term view of action to avoid this type of situation recurring year after year?

Lord Davies of Oldham: My Lords, I certainly agree with the last point. That is why the Government are concerned to put in place a long-term strategy to improve our position with regard to energy supplies. As the noble Lord said, that is forced upon us by the end of our independence with regard to our energy supplies in this country. We shall be importing energy, as the whole House knows. That is why, for instance, we are increasing gas storage facilities and are about the business of contracts for liquefied natural gas. It is why, in fact, we are promising next year a complete review of the position on energy, because we realise that the situation needs long-term solutions.
	As for the noble Lord's first point, he will recognise that we guarantee in all circumstances supplies to domestic consumers. In the exceptional case that he quoted—which is a winter circumstance that happens only twice a century—there is no doubt that we would be under stress with certain industrial consumers. But they adapt to circumstances, as they have always done in the past.

Lord Taylor of Blackburn: My Lords, in view of what the Minister has said and in view of the question that I asked earlier, to which my noble friend replied, would he like to give me the same or a different answer to the one that I received before?

Lord Davies of Oldham: My Lords, I thought that my noble friend's answer was quite brilliant, and I am happy to endorse it.

Lord Lawson of Blaby: My Lords, in view of the question that I did not ask earlier, is the noble Lord aware that carbon emissions from coal are twice as great as those from gas and that carbon emissions from nuclear are zero? In the light of that, how does he explain the logic of the Government's climate change levy, which falls equally on all three?

Lord Davies of Oldham: My Lords, I could have wished that the noble Lord had asked his question earlier; but let me emphasise that we are, of course, concerned with coal in terms of cleaner coal technology. That is why we are investing, alongside the United States, substantial amounts of money in research in that respect. He is right that nuclear is carbon-free once it is in production, but he will also recognise that the establishment of a nuclear power station produces problems for the atmosphere. So there is not a zero-sum position with nuclear fuels. Although of course he is right about the carbon imprint, with regard to gas the noble Lord will know how much we are investing in energy from more benign sources, and how much we are on course to deliver in that regard, which will reduce carbon emissions by 2010.

Lord Tanlaw: My Lords, can the Minister say whether hydrogen has a part to play in the long-term energy strategy, and the production of hydrogen as a replacement for diesel and petrol for motor vehicles?

Lord Davies of Oldham: My Lords, as we all know with regard to the research carried out so far, that is such a potentially benign energy source that we would hope it had a role to play in the future. However, the noble Lord knows as well as anyone in the House that we are still a considerable way from transforming the research into viable projects. Until we are in that position we cannot place reliance on it.

Lord Redesdale: My Lords—

The Earl of Onslow: My Lords—

Lord Rooker: My Lords, if one goes by the order, it is the Liberal Democrats' turn.

Lord Redesdale: My Lords, perhaps the noble Earl is confused by sitting behind so many. The Minister said that infrastructure will be considered over the following year. However, this situation is not of great surprise. We have known for a long time that the North Sea gas supplies are running out. We have only three days' supply, whereas Germany has 55 days' supply. Which department is responsible for future planning? It seems to have come as a massive shock to the Government that no supplies are being built and it will not take just one year to rectify the situation.

Lord Davies of Oldham: My Lords, nothing comes as a surprise to the Government, and certainly not in this case. The noble Lord is wrong. We do not have three days' gas supply; we have 11. We also have an increase in storage facilities. With regard to the 11 days' supply, we are increasing that capacity. We also still have indigenous resources. The Netherlands, which also has indigenous resources, has no gas storage facilities of any kind. One can over-dramatise the position that faces us with regard to energy. That is not to say that important decisions do not need to be taken; that is why the Prime Minister announced a few weeks ago that those decisions will be taken next year.

Baroness Shephard of Northwold: My Lords, both the noble Lord and his colleague in an earlier Answer spoke of the challenges facing the Government's energy policy. When do the Government intend to meet the challenge posed by their lack of encouragement so far for biofuels?

Lord Davies of Oldham: My Lords, in terms of meeting the general challenge, preceding each of our winters over the past three years, there have been contentions in this House that we are on the brink of a national emergency, yet we have always had a sufficient margin in hand for supplies. Even in the extreme case quoted earlier of a winter such as that of 1962–63, we are indicating that we will be able to cope with regard to the domestic consumer.
	The noble Baroness is right that we need to and are seeking to encourage the development of biofuels. They have a role to play; and that is why we are concerned that they should play an increasing part in the general supply of energy to this country. But she will recognise how marginal that contribution is when we are talking today principally about supplies of gas, which are bound to be a major element in our energy supplies. That is why we have entered into the contracts for liquefied natural gas to be imported to the country and have sufficient storage to be able to receive it.

The Earl of Onslow: My Lords, of course the noble Earl is confused; that is why he is asking the Government a question. He is confused by the Government's reaction. Have they seen the figures in today's newspapers, reliably reported in the Times, that nuclear is the cheapest energy per kilowatt hour, wind power offshore is by far the most expensive, wind power onshore is the second most expensive and that both require coal-fired or gas-fired generating powers as standby so that they produce no carbon gas net savings at all?
	Furthermore, we are running out of nuclear energy over the next 20 years and we are not an energy exporter, which has been pointed out several times. Surely we must take up nuclear energy as quickly as possible and not allow the Prime Minister to be frightened of his own Back Benches on the issue.

Lord Davies of Oldham: My Lords, I have indicated that we have a timetable for the consideration of the issue with regard to the nuclear industry. The noble Earl is wrong to say that nuclear energy is cheaper; it is cheaper only if we write off certain areas of cost, not least the costs of waste disposal, which are still a major issue in this country. He is measuring the full and total costs of wind power while putting the case for the nuclear industry and deleting a significant part of the costs.

Lord Dearing: My Lords, the Minister referred to the energy with which his Government and the United States are investing in clean coal technology. A long time ago a distinguished economist described our country as one that was "built on coal, surrounded by fish". The fish, alas, have gone but much of the coal remains. Will the Minister undertake, in reviewing energy policy, that the Government will make an up-to-date assessment of the extent of our country's coal reserves?

Lord Davies of Oldham: My Lords, the noble Lord is right to say that we have extensive coal reserves, although he will also recognise that decisions taken in the 1980s vastly reduced those reserves because, once mines are flooded, they are very uneconomic indeed to re-open. We do have coal reserves, but their use is dependent on us developing the technology that reduces carbon emissions from coal. That is absolutely critical. So those two factors are interlinked.

Lord Howell of Guildford: My Lords, is the Minister aware that there is no shortage of gas in the North Sea and no reason why the British consumer should pay much more than the French and the Germans—as is the case? Enormous new fields have been opened by the Norwegians, but there is one snag. The pipelines to land that gas at Easington on the east coast of the UK have not been built and that is a failure of planning. Should not the Government, who, I understand, pride themselves on planning, have established earlier the pipelines necessary to ensure that we do not go short of gas?

Lord Davies of Oldham: My Lords, the noble Lord raises an important point in terms of communications with Europe for the supply of gas. That is why we are pleased to report that the Belgian and Norwegian interconnectors are being widened. We must be able to develop our resources at this end, too. But the noble Lord will recognise that, in fact, we have for some considerable time been able to exploit the North Sea for our own use with our own resources. We are transferring to that new position and we have a strategy for employing those resources properly.

Criminal Defence Service Bill [HL]

Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Consumer Credit Bill

Lord Sainsbury of Turville: My Lords, I beg to move that this Bill be now read a second time. The UK has one of the strongest and most efficient consumer credit markets in the world. We represent a quarter of the EU credit market generally, and 50 per cent of the EU credit card market. For 30 years, the consumer credit market has helped to build what is now a thriving economy, with low interest rates and record employment. It is this credit market and this economy that has not only enabled our consumers to achieve high standards of living, but has also ensured that our businesses can flourish.
	We want to ensure that this market remains competitive. But the consumer credit market has changed immeasurably since 1974, when the current legislative framework was established. Then, only one credit card was available; now there are 1,300. Then, £32 million was owed on credit cards; now it is over £49 billion. There is clear evidence that some consumers are suffering significant harm. We cannot deny that irresponsible or unscrupulous lenders can destroy lives. Borrowers can find themselves with credit agreements that they either do not need or do not understand. Often, the most vulnerable in society are disproportionately affected. More than half of the over-indebted households have incomes of less than £7,500 per year.
	Noble Lords may be aware of the case which the Under-Secretary of State described to the other place. The case concerned a couple, both of whom suffered from mental illness, whose initial loan of £500 spiralled to debts of more than £5,000. But in addition to this, the couple also owed another £19,000 to other lenders, and had no means to repay it. We need to drive out irresponsible lending, not only to protect consumers, but also to ensure that credible businesses can operate with confidence in a competitive market. We also want to empower consumers to make informed borrowing decisions. This relies on transparency and clarity of agreements with lenders, and on consumer confidence in appropriate levels of rights and redress. In this context, the Government are committed to full-scale consumer credit reform with one over-riding aim: to create a fair, clear and competitive consumer credit market for the 21st century.
	Noble Lords will no doubt be aware of the important work already completed by the Government in this area. Our consumer credit White Paper of 2003 set out the Government's agenda. Since then we have introduced secondary legislation, developed initiatives for tackling over-indebtedness, and run pilot projects to tackle illegal money lending. Our secondary legislation has standardised the method by which APR is calculated for running account credit, so that consumers can compare credit advertisements with confidence. We have required lenders to provide, at the outset, key information clearly on the product, and we have made early settlement charges fairer and more transparent for consumers.
	The Bill builds on the good progress we have already made. We have consulted carefully and widely, with business, consumer groups and regulators. I am confident that this input has helped to get this legislation right.
	The Bill itself is built around three key themes: enhancing consumer rights and redress; improving the regulation of consumer credit businesses; and ensuring that regulation is appropriate. Our first key objective is to enhance consumer rights and redress. We believe that consumers should have the right to challenge unfairness where it exists and obtain redress where appropriate. The current tools available to consumers for obtaining redress or solving credit disputes are, at best, limited. Where disputes with lenders arise, consumers are often restricted to court action. This can be costly and time-consuming, for both consumers and lenders. As such, consumers are dissuaded from making what would be legitimate complaints. Furthermore, even where complaints are taken to court, examples of success for the consumer under the existing extortionate credit test are rare.
	The Consumer Credit Bill addresses these problems in two key ways. First, the Bill will introduce an alternative dispute resolution (ADR) scheme for consumer credit disputes. ADR will empower consumers with a fast and effective means of resolving disputes, without having to resort to court action. The ADR scheme will be free for consumers, meaning that all consumers will have access to redress, and not just those who can afford to pay for it. The system will be run by the Financial Ombudsman Service (FOS), an independent and credible ADR provider. In developing this ADR system, we have worked hard to ensure fairness on both sides of the dispute. Therefore, the FOS will be able to consider disputes only once a lender's internal complaints handling procedures have been exhausted. In addition, the FOS will be able to refuse any frivolous or vexatious claims, if appropriate.
	Secondly, the Bill improves means of redress for consumers by replacing the out-of-date extortionate credit test. Too many real cases have shown that the old test sets the bar for what is "extortionate" too high to be of use. Equally, the test has been confined to the cost of credit or terms of agreement at the time the agreement was made. Noble Lords will appreciate that having a credit card or personal loan is not just about price. Many other factors can impact on an agreement, such as the lender's conduct in administering the loan. That is why the Consumer Credit Bill introduces a new test based on the principle of unfairness. Consumers will be entitled to apply to court to challenge agreements where there is an "unfair credit relationship".
	Under the new test, courts will be able to consider all aspects of the transaction, including the lender's conduct before and after making the agreement, the administration of the loan, and the overall terms and conditions of the agreement. The new unfair relationships test ensures that the courts will have wide discretion to assist those who face unfairness from lenders.
	On top of those improvements to rights and redress, consumers must also be confident that they are borrowing money from responsible lenders. Our second key objective is therefore to improve the regulation of consumer credit businesses. The Office of Fair Trading runs the consumer credit licensing regime and polices licence holders. But the OFT is currently hampered in its work by the bureaucracy associated with licence renewals, limited information-gathering powers and a lack of intermediate sanctions. The Bill will therefore streamline the licensing system. It will create more focused categories of licence and introduce standard indefinite licences, removing the need for renewal. That will make the regime easier for the OFT to administer and more proportionate for licensees.
	The Bill will give the OFT powers to obtain the information it needs to ascertain and monitor the fitness of firms to hold a licence. The OFT will also be able to impose measured requirements on licensees, and financial penalties for failure to comply with such requirements in cases where it is not proportionate to withdraw the licence completely. Of course, we have put in place safeguards against disproportionate use of requirements. They include the obligation for the OFT to issue guidance, a procedure to seek representations from the affected person, and a right of appeal for licensees to the Consumer Credit Appeals Tribunal.
	The Bill also introduces a broader test that the OFT will use to decide whether someone is fit to hold a licence. The current test is too limited: it essentially relies on past behaviour as a guide to future conduct. The new fitness test will enable the OFT to assess positive evidence of credit competence on an ongoing basis. It will help the OFT to identify irresponsible lenders and drive them from the market.
	To industry's benefit, the new test ensures that businesses will need to satisfy the OFT only that they are "fit" to hold a licence for the specific area or areas of consumer credit activity that they undertake. This system will be less onerous for business and more targeted for the OFT, which will be able to concentrate its attention on the areas of highest risk. Enhancing OFT powers and the licensing regime in these ways will improve the way that consumer credit businesses are regulated.
	Noble Lords will also appreciate that keeping consumers informed is an essential part of being a responsible lender. That is something that the Government have been particularly keen to promote. More informed and more confident consumers will reduce the risk of over-indebtedness and encourage competition in the market. The current regime means that consumers are too often surprised by arrears or default fees or are not even told when they are behind with their payments. The Bill will therefore ensure that lenders give consumers regular information about the state of their credit account, including whether they are in arrears, whether they have incurred default sums and whether they are incurring interest on judgment debts. These changes are essential, but their success also depends on the scope of regulation of consumer credit businesses.
	That is why our third and final aim is to ensure that regulation is appropriate. Regulation must be appropriate and measured, ensuring comprehensive protection for consumers, while allowing industry the flexibility to innovate. The consumer credit market, and the amounts consumers borrow, has grown considerably over the past 30 years. Nowadays, it is not uncommon for consumers to borrow more than £25,000, for example, for debt consolidation purposes and second charge mortgages. But the existing legislation does not cover consumer credit borrowing over that amount. The Bill therefore removes the £25,000 financial limit, extending the protections of the Act to cover all consumer borrowing.
	Extensive consultation also highlighted concerns about the impact of regulation on business lending and "high net worth" individuals. We listened to those concerns to ensure that the Bill provides protection where it is needed. We will therefore maintain the protections for business lending under £25,000 and exempt business lending above that limit.
	The Bill also enables the Secretary of State to make secondary legislation allowing "high net worth" borrowers to opt out of regulation, provided they meet specified criteria and undertake certain steps. This not only empowers those individuals, but also allows industry the flexibility to innovate.
	I have described in some detail the extended protections for consumers. However, lenders must also be confident that they are operating on a level playing field—they should also be protected. Under Section 127 of the existing legislation, lenders can be unfairly penalised for minor, insignificant or technical breaches of certain requirements of the consumer credit legislation. In such cases, the agreement becomes automatically unenforceable. There have been cases where consumers have benefited unfairly from this.
	The Bill therefore makes the Section 127 provisions more proportionate. It gives the courts full discretion to rule on the extent to which defective agreements may be enforced, or not, by the lender. This will not remove consumer protection, because agreements can still be found unenforceable. It will, however, be fairer for business. This more appropriate approach to unenforceability must be seen in the context of the wider reforms of this Bill, such as the new unfair relationships test and ADR provisions, which will provide more protection for consumers.
	I have outlined the content of the Bill in some detail. I now refer briefly to one particular issue concerning something that is not in the Bill; namely, data sharing. This was the subject of lively and interesting debate in the other place. Lenders are not able to share data on credit accounts that were opened before the late 1990s, when it became routine for lenders to ask borrowers for permission to share their credit data.
	There has recently been some pressure from industry to use the Consumer Credit Bill as a vehicle for addressing this issue. However, as the Under-Secretary of State explained during the Report stage in the other place, the issues around data sharing are wider than just those covered by the Consumer Credit Act . It is also important to ensure that the benefits gained from the sharing of these data are proportionate to the legislative measures involved. Noble Lords will appreciate that we do not want to rush out approach to this complex issue.
	Data sharing will therefore not feature in the Bill. However, the Government have listened to industry and believe that data sharing is a necessary and important means of ensuring responsible lending. So I am pleased to announce that we intend to consult on the issues raised by industry proposals, to investigate the case for relaxing restrictions on data sharing for the purposes of assessing ability to pay credit. This will ensure that we get the approach to data sharing right.
	In conclusion, the Bill is a comprehensive and long-awaited piece of legislation. It received a relatively smooth and quick passage through the other place. It provides a balanced set of provisions, which will benefit both consumers and industry. It builds on a significant amount of previous work, it enhances consumer rights and redress, it improves the regulation of consumer credit businesses, and it ensures appropriate regulation. The Bill sets the framework for a fair, clear and competitive consumer credit market for the 21st century. I commend it to the House.
	Moved, That the Bill be now read a second time.—(Lord Sainsbury of Turville.)

Baroness Miller of Hendon: My Lords, before I begin what I had intended to say, I only realised as I read the newspaper today that it is the Minister's birthday—a very significant one. With the leave of the House, I pass on all our good wishes to him.
	I thank the Minister for his full and clear explanation of the Bill. We are already somewhat familiar with it, due to it being the second time that it has reached your Lordships' House, after twice passing through the other place and being dropped here because of the general election.
	First, I shall restate our attitude to the general principle of the Bill, as stated by my honourable friends during both Second Readings in the other place. The Bill presents Parliament with a valuable opportunity to bring the law on consumer credit—which is largely based on a 30 year-old law—up to date.
	The whole market, the attitude of borrowers and the opportunity to incur debt have changed out of all recognition since 1974. For example, the number of issuers of credit cards has risen from a handful in 1974 to some 1,300 today and whereas a credit account with a major store was then a sort of status symbol, they are now pressed on customers at every possible opportunity. That is an important background that the Bill has to address. It took 600 years of banking history for household debt to reach half a trillion pounds but in the eight years since the Government took power, it has more than doubled to more than 1.1 trillion. One household in five is now using more than a quarter of its income on consumer credit repayments.
	I assure the Minister that I am not making any political point on this by suggesting that it is anything to do with the Government, but it is a fact that the current buoyant state of the consumer market is not caused by a comparable increase in GDP or by the wise stewardship of the Chancellor of the Exchequer. It is caused by the torrent of credit available to almost everybody and anybody and the daily incitement to remortgage the family home, instead of treating the windfall in house prices as extra security for old age. Having said all that, I am saying in general terms that we accept the Bill and are pleased to see it come before this House.
	I find most objectionable the sort of television advertisement in which someone is paraded in front of the camera to explain how his crushing burden of multiple debts has been replaced by a single affordable monthly payment. So far, so good. But then he goes on to say, "So we even had enough left over to pay for a new car or a new holiday" as though building up further debt was an acceptable or appropriate way to behave. Do these people not realise that they will be paying for that holiday for the next quarter of a century or that the car will long have been scrapped before they have finished paying for it? It is no wonder that the Bank of England has repeatedly expressed concern at the level of personal indebtedness and the economic consequences that will ensue if the bubble ever bursts.
	In supporting the objectives of the Bill, we have certain reservations that, despite two opportunities during its passages through the other place, the Government have not been able to rectify. There is a lack of detail in some aspects of the Bill that could have been cleared up since January, when it received its First Reading in the other place. That is bad for business and consumers alike. With 11 months of extra time, there is no reason why drafts of the regulations in respect of matters that the Government choose to cover by secondary legislation should not be available now for us to see. The Government should also know that, in view of the far-reaching effect of the regulations that will affect so many vulnerable people, we will press for those regulations to be subject to the affirmative procedure.
	While endorsing the extended protection that the Bill will give consumers, it should be an underlying principle that no additional burden is placed on legitimate business without there being a positive effect. The case that the Minister mentioned was not familiar to me, but I know of the infamous Meadows case, where a loan of £5,750 escalated, despite payment of instalments, to a staggering £384,000, resulting in the courts having to exercise some judicial ingenuity to strike down that iniquitous claim.
	Clause 19 introduces a so-called "unfairness test". That fulfils the much-needed objective to redress the balance between creditor and debtor in the same way that legislation on unfair terms and conditions does in other fields. However, we believe that it definitely needs modification, so that it still removes any imbalance against the debtor but will not provide an unfair escape loophole to avoid a legitimate debt incurred with a reasonable and responsible creditor. The Government have not met our concerns on this point. We will introduce some amendments in what we consider to be one of the core provisions of the Bill for your Lordships and the Government to consider.
	I have listened with care to what the Minister said about data-sharing. I am sure it will not surprise him that I intended to bring that up, and say why we thought it was a valuable tool. In view of what he has said about the review they will initiate, however, I shall leave out a couple of paragraphs of my speech, which will no doubt please your Lordships. To give one simple fact, there were 13,229 individual bankruptcies in the first quarter of this year—an increase of 1.6 per cent on the previous quarter, and nearly 28 per cent on the same quarter in 2004.
	Then there are the functions of the OFT. We believe that they need to be spelt out more precisely, including the way that it should be empowered to issue so-called guidance, which can have far-reaching effects on the credit industry. We want that guidance to be subject to oversight by the Secretary of State who in turn is, of course, answerable to Parliament.
	The Bill provides for civil penalties for certain breaches of its provisions. These penalties should be subject to five-yearly reviews and amended, if appropriate, by order—in the same way that some criminal penalties are, without taking up parliamentary time with primary legislation.
	There is also what is called the "half-rule", which I confess I had never heard of until I started looking into the Bill and received numerous briefs from the lobbyists about it. As anyone who has ever read the extraordinary fine print of a hire-purchase agreement will know, the rule relates to the consequences of early cancellation of the agreement by the hirer. Saying that I had never before heard of it makes it quite clear that I never read a hire-purchase agreement until now; I leave such things to my husband. The half-rule is claimed to be an out-of-date issue, but we will be putting down a probing amendment to ascertain the Government's view, which has not hitherto been made clear.
	We have views on the unsolicited increasing of credit card limits and the blatant sales device of credit card cheques. Those are designed to suck the customer into extra spending and liability to interest. I do not know which of your Lordships read page 20 of the Times today. It was in reading the Times that I discovered it was the Minister's important birthday today, but on page 20 Rose Heiney, a student, tells her story in her own words. She has just been approved for another gold card—the third in the last two months, with a loan facility of £6,000 and the withdrawal power of £500 a day. She said, quite rightly, that she will probably end her studies in debt anyway; she has to live, to buy books, and so on. She tends to be a rather extravagant girl, and she said she certainly does not need more credit cards foisted upon her. I hope that the Minister will in due course look into such things—they do cause problems.
	I do not want to take up more of your Lordships' time at the moment, as other noble Lords are, I know, waiting to speak on this important subject. But I would like to mention that my noble friend Lord Mawhinney and the noble and learned Baroness, Lady Clark of Calton, will both be making their maiden speeches today. I look forward to hearing them and would like to congratulate them in advance, for obviously I know not what they say. I also congratulate the noble Baroness who will be responding to this debate with her maiden speech, and wish her every success in her time on the Front Bench.
	We will table any necessary amendments in good time, so as to enable the Government to have ample opportunity to consider them—instead of being able to say, straight off, no, we do not have time. We want them to be able to consider our amendments carefully. This is a sufficiently uncontroversial Bill for the Government to be able to discuss with us any differences which are likely to be on detail rather than principle. I hope that they will feel able to do so.
	My noble friend Lord De Mauley will be winding up and will mention some other matters that concern us. While mentioning my noble friend, it is right that I mention to your Lordships as a courtesy to Ministers and to the House that he has kindly agreed to take a substantial part in the carriage of this Bill from these Benches to give me a chance to recover from a very nasty gastric ulcer from which I am suffering. However, let me assure your Lordships that that is nothing whatever to do with the Government or, indeed, the Minister, who has crossed swords with me many times across the Dispatch Box.

The Lord Bishop of Worcester: My Lords, I am sure that we would all respond to what the noble Baroness has just said by wishing her a speedy recovery.
	Two Christmases ago, I received an advertisement from a bank that invited me to make my Christmas happy with a personal loan. I hope that no one has offered to make the Minister unhappy on his birthday with a similar offer.
	I ought to begin by declaring an interest, although I am not entirely sure about the boundary between declaring and advertising an interest. I am the author of a book on the subject, so I declare that interest and say that the book is available at all good bookshops.
	Like many people who have spoken about the Bill, including the noble Baroness, I support it. Paradoxically, the relatively small number of noble Lords who have advanced their names to speak in this debate reflects the fact that it is relatively uncontroversial and widely supported. That is a very good thing. It is extremely important that we deal with issues of unfairness. As it has not been mentioned so far, I acknowledge the contribution of an excellent report produced by a commission under the chairmanship of the noble Lord, Lord Griffiths, which I believe was set up by the then shadow Chancellor and which has many valuable things to say on this topic.
	Behind the Bill lies the awareness, which is widely shared, that the place of the market in credit is extremely important, but that it cannot be left to itself. This is not an area where we can simply let price decide; there are public interest issues in the level of credit and how it is given and enforced. That is why the part of the Bill that begins with Clause 19 is so important. The introduction of the notion of unfairness in a credit relationship seems right. I do not agree with the Confederation of British Industry that that must be spelled out in great detail. That seems precisely a matter that we can look to the courts to decide, while providing through our debate some indication of some of the factors that we want the courts to bear in mind in considering unfairness in the matter of credit relationships.
	I realise, as will other noble Lords who have received the same briefings, that a debate is under way among those who deal a lot with the vulnerable victims of indebtedness about whether some kind of ceiling on interest rates would be a good thing, with the citizens' advice bureaux, whose experience in this matter is formidable, briefing against it, and Debt on our Doorstep, which includes a huge number of significant agencies, considering that one would be helpful. My view is that the interest rate should definitely be a factor that the courts could bear in mind in deciding whether a loan is unfair. I do not believe that one has to spell out an exact figure, and I am certainly not in favour of the criminalisation of lenders unless, of course, they resort to threatening behaviour. But interest rates can be unfair, even if they are properly notified and agreed with.
	In a matter of this kind, if one allows the market to rule, there will be those whose weakness in the market and in their general financial circumstances makes them likely to enter into relationships that are unfair and which it is not in the public interest that they should enter into. It is certainly not in the public interest that we should provide courts and legislative machinery for the recovery of debts from people who have been the victims of very unfair interest rates.
	It seems to me that the situation is analogous to world trade. It is possible for a market to produce situations that are unfair, and if they are unfair, it is proper for society to intervene, whether nationally or internationally, to rectify that unfairness. In that respect, I do not believe that the market should be sacrosanct.
	My main purpose in speaking in this debate is not one that will have any direct effect on the drafting of the Bill, but it is something that we need to think more seriously about than we are apt to: that is the cause for reflection contained in the very title of the Bill: consumer credit. Those words draw attention to the fact that the rates of interest and loans, to which we are devoting attention in this debate, are for consumption. Without doubt, attitudes to the use of borrowing for the purpose of consumption have changed radically in our lifetime. In an earlier debate, the then Minister said that in making this point I was asking for a return to pre-modern economics. That is not the case. I ask that we take seriously what our parents and certainly our grandparents would have taken very seriously, that the escalation of indebtedness is not a social situation with which we should be content.
	There is no doubt that the availability of credit and the changing attitudes to credit have had a major effect on, for example, the housing market and on levels of consumption. That has produced a bubble which might burst, causing enormous human suffering. Even if it does not burst, it is already having an effect on the consumption of the world's resources which should be available for tomorrow. We are treating the planet on which we live as a credit card; a credit card with no credit limit and no repayment date. That is because we have allowed attitudes to change in a very uncritical way. I am not asking for a return to pre-Depression economics, but it seems to me that we have sleep-walked into a realm of imprudence about which a good deal of further reflection and, if necessary, economic and legislative action may be required.
	In that connection, perhaps I can comment on what the Minister and the noble Baroness have said on data sharing. One of the insufficiently remarked on aspects of data sharing is the weakness in the credit market of anyone who has never borrowed before. It is almost becoming necessary to advise people to take out a loan even if they do not need one because only if one has had a loan and repaid it does one have a credit rating. That is a serious situation, in which we are disadvantaging people for living within their means.
	We also need to take seriously the effect the transfer of finance from grant-aiding to loans has had on the student population. It is true that when grants were inadequate people took out loans, but now they have one kind of loan—a student loan—and other loans, offered by the banks which they usually need to take up. That is educating people to fail to distinguish between loans for investment and loans for consumption, and that is deeply misleading. We should be very concerned about that, and I should like to feel that the Government would be similarly concerned.
	So the issue of data sharing is not just an issue of civil liberties, though it certainly is that. It is also a subtle means by which people are lured into a level of debt beyond what they should have. I am concerned that, as well as attending to the detail of this Bill—and I hope to play some part in that—and ensuring that the unfairness test includes all the factors that can contribute to unfairness in a debt and credit relationship, we do not put from our minds the aspect of economic change in our general living, which is this escalation in debt and credit.
	I frequently use the example of people who took out mortgages before the war, and were quite clear that it was their duty to repay as quickly as possible, because others might need a mortgage more than they did. Imagine walking into a building society today and saying that you would like to repay your mortgage in order that someone who needs it more than you do could have one: you would certainly be looked at as though you were from another planet. That is quite a grave situation—a situation in which people are encouraged to borrow beyond their means. One of the things I shall be looking out for in Committee is that we make clear to ourselves that allowing somebody to borrow what they cannot properly repay should be grounds for being deemed to have entered into an unfair credit relationship.
	I repeat my support for this Bill; I repeat my support for the desire to do something about unfairness in debt and credit relationships. I wish to add that some of that unfairness is induced by the totally uncritical attitude adopted in recent years to the explosion in credit. I believe we should remedy this before it is too late.
	I know that the House is eagerly awaiting the maiden speech of the noble Lord, Lord Mawhinney, and will welcome the enormous experience, not least in this area, that he will bring to the work of the House.

Lord Mawhinney: My Lords, on making my maiden speech, it is a great pleasure to follow my noble friend, Lady Miller of Hendon and the right reverend Prelate. As an Anglican of the evangelical tradition, he will not be surprised that he and I take a broadly similar view of this piece of legislation.
	Last Thursday, along with many others, I attended St Margaret's Church for the memorial service of my very good personal friend and former member of this House, Emily, Lady Blatch, of Hinchingbrooke. In the bidding Canon Robert Wright said that Emily Blatch rapidly came to adore the House of Lords. I empathise with that view. It is a great privilege to be elected to serve the people in the other place. In joining your Lordships' House, I feel myself doubly privileged and doubly blessed. I thank Members of this House and the staff for the warm welcome and courtesy they have shown me in the past few weeks. It was much warmer and more embracing than the welcome that I was offered when I entered the other place in 1979. I seek only the traditional patience of your Lordships as I learn the details of the operation of the House, where there are snags aplenty for a new boy. I also thank my very old friends, my noble friends Lord Harris of Peckham and Lord King of Bridgwater for being willing to stand with me at my introduction.
	I commend the Government on introducing the Bill, and I thank the Minister for his careful exposition of it. It follows legislation enacted in 1974. Much has changed since then. I had access to the same information as others. Then, there was one credit card company and £30 million of debt; today, there are 1,300 credit cards and almost £50 billion of debt.
	As the right reverend Prelate pointed out, we also have a different view of debt today. We are less censorious. He rightly pointed out that there were down sides to that more liberal view, but it has also resulted in an improvement of life for many people. Financial markets have been liberalised and, as a consequence, choice has been extended, as we have heard and, no doubt, will hear further. That has been to the benefit of consumers, assuming always that they keep in mind the golden rule—the need to balance debt with the ability to pay that debt. The second golden rule is to remember that debt that is affordable this year may not be affordable next year.
	Not only has there been change since the previous legislation, the speed of change is startling. My noble friend quoted the remark made by our right honourable friend the Member for West Dorset about how we had had 600 years of banking history and eight years in which debt has doubled. That is a frightening speed of change. In June, at Second Reading in the other place, my honourable friend the Member for Wealden said:
	"Research by Datamonitor reveals that consumer borrowing for each adult in the UK through credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to more than £4,000, which is an increase of . . . almost 50 per cent. since 2000".—[Official Report, Commons, 9/6/05; col. 1417.]
	The Bank of England has confirmed that household debt is rising at the rate of 15 per cent a year. The legislation is welcome in principle, not just because things have changed but because things are changing so quickly.
	There are four concerns that, I hope, will be addressed satisfactorily before the Bill makes its way to the statute book, as undoubtedly it will. I cannot be the only Member of your Lordships' House who almost weekly receives through the mail unsolicited invitations to sign up for yet another credit card, each one of which has an advantage that makes that card the one that I always must have. I yield to no one in my admiration for the market place and for the freedom of the market place, but the right reverend Prelate was right: occasionally, in public interest terms, we must look at the operation of the market place. I for one would be happy to have fewer unsolicited invitations to get into debt, and I hope that the Bill will address that issue before it reaches the statute book. I am not quite sure of the procedures here, but I declare that I have one credit card. I used to have two, the second as a back-up, but at the moment I have only one.
	The second issue that I hope the Bill will address is the unsolicited increases in borrowing limits. No one has ever asked me whether I wanted my borrowing limit raised, but it has been raised regularly over the years. No one has ever checked whether I have the ability to repay the credit limit that the banks have so generously bestowed upon me. I hope the Bill will address that issue as well.
	As a former Member of Parliament, I know the destruction that can occur to individuals and families through a combination of those two events. People can, and do, get into the most enormous debt. Only the scariest stories appear in the media, but Members of Parliament can testify that they hear many equally scary stories in their surgeries and are not capable of offering the kind of help their constituents seek.
	The third issue I hope the Bill will address before it reaches the statute book is the necessity for much greater clarity about where financial responsibility lies when cards are fraudulently cloned. I have to declare another interest: twice in the past few years my credit card has been cloned. I pay tribute to the HSBC bank, with which I bank, that it spotted at least the first one before I spotted it. It is possible to take out insurance but there is a grey area, in my experience, between the bank assuming responsibility and the individual assuming responsibility. I hope that there will be much greater clarity on that point before the Bill reaches the statute book.
	Finally, I hope that, arising from this legislation, consumers will have much clearer, more jargon-free information about contracts, with greater transparency which makes it easier for consumers to understand what it is they are signing up to. I welcome the unfair relationship test but I would like more definition; I would like to know what it means. I hope we can find out what it means from the Minister during the passage of this legislation. I know from 26 years' experience that most ordinary people do not instinctively think of going to the courts when they have a problem. Most of them are, understandably and correctly, very nervous about taking on big organisations with almost unlimited resources; many are simply financially not capable of resorting to the courts. So, for those reasons, we need new systems in place that are easier to understand, easier to work and easier to produce results, when appropriate, for consumers. In this legislation the unfair relationship test is crucial, but it needs more work.
	The 1974 Act took six years to achieve full implementation. It would be helpful to know at some point how long the Government think will be necessary to allow for full implementation of this Act and whether guidance will be offered towards the intermediate stages as the Act is implemented. I, too, welcome the legislation and I hope to take an interest in its passage through your Lordships' House.

Lord Borrie: My Lords, it is a great honour and privilege to follow the noble Lord in his maiden speech. He had a distinguished career in the other place and held a number of important offices, ending up with the somewhat arduous task of being chairman of the Conservative Party. But despite the many successes that he has had, I was reminded during his speech that he has had his failures as well. The noble Lord, Lord Rodgers of Quarry Bank, came into the Chamber. I believe that he defeated the noble Lord when he was trying to get his feet on the first rung of the ladder.
	It is very encouraging that the noble Lord, Lord Mawhinney, has sought to make his maiden speech quite so soon after his elevation to this House. There are those Members of this House who have held high office whom we do not see much; there are others who, we are glad to note, feel that they have a further contribution to make. I take it that the thoughtful, excellent speech that the noble Lord has delivered today is an earnest that we will hear more from him in the future. After all, to use a word that has become common in the past few days in various contexts, I have a feeling that the noble Lord has a "hinterland"; in fact, he has several hinterlands. He has Northern Ireland; he has the Church of England; and he has something which is quite rare in this House, let alone in the other House: he is a scientist. In all those respects, he will be welcome to speak on whatever subject he chooses. We all must welcome his arrival in this House and wish him well for the future.
	I declare an interest, albeit a past interest, in that between 1976 and 1992, I was head of the Office of Fair Trading, which was responsible for the licensing system that was established by the Consumer Credit Act 1974. It was realised even then that we had moved on a great deal. The checks to determine the fitness of someone to hold a licence helped to clear the industry of some of its worst elements. The Minister has already indicated that it is most helpful that the Bill widens the criteria on which a trader can be tested by covering competence as well as fitness. A very serious weakness of the 1974 Act was that the only sanction for misbehaviour was the nuclear one. To say that some eminent bank should be deprived of its licence to lend to hundreds of thousands of people because of some minor misdemeanour would have been absurd. The current Bill, I am happy to say, proposes a flexible range of sanctions, including reprimands and fines as appropriate.
	It is worth saying—the right reverend Prelate and the noble Lord, Lord Mawhinney, mentioned it—that the Crowther committee stated in 1971 that most people used credit wisely. I read that phrase again recently. I had a feeling that the committee was perhaps being a little over-optimistic. Or perhaps that was the feeling in 1971. I think that most people probably still use credit wisely, but it is evident that there are more worries about it now. However, the freedom of access to credit should not be unduly restricted. There is hardship today among people who are over-committed, but that hardship could be far worse if, for example, a statutory ceiling on interest pushed more people into the arms of illegal money lenders and loan sharks operating in the shadows of our major cities.
	I notice that it was mentioned in the debates in the House of Commons that the OFT draft guidelines on fitness to hold a licence refer to the need to be sure that the borrower can repay the loan. I do not know how many of those credit banks and credit card purveyors to whom the noble Lord, Lord Mawhinney, quite rightly referred really check up on the student who was mentioned by the noble Baroness, Lady Miller. I do not suppose that they check up at all—they just hope for the best. If that is to become a reality, however, we need to hear a lot more from the OFT and its guidelines.
	The 1974 Act included provisions to protect consumers from so-called extortionate credit bargains. There seems to have been an all-party view in the House of Commons in the passage of the Bill that that definition of extortionate credit bargains was so high a hurdle as to be pretty useless. For 30 years, experience suggests that the provisions have hardly been of any use in protecting vulnerable consumers from exploitation. The Government are right—subject to a qualifying remark I will make—to replace them with Clauses 19 to 22, so that a court can consider all aspects of the agreement and the way it is operated to see if the relationship between the creditor and the debtor is unfair.
	I understand the concerns of banks and others, some of whom have lobbied me on the subject and, no doubt, have lobbied others. They are worried about the uncertainty of the test. They do not know when the relationship will be regarded as unfair. In the nature of things, legislation cannot foresee all the circumstances in which vulnerable consumers may be exploited. Given that we are unlikely to have another consumer credit Bill for another 30 years, how can anyone foresee what relationships may be regarded as unfair? Reliance ought mainly to be placed on the courts.
	Clause 22—which I confess I do not fully understand and hope the Minister will help to explain—talks about giving guidance on the inter-relationship between the provisions on unfair relationships and Part 8 of the Enterprise Act 2002, allowing the Office of Fair Trading to bring proceedings against anyone who harms the collective interests of consumers. Will the Minister give an indication of the OFT's intentions regarding Clause 22? Without such guidance, I should mention something significant: the legal opinion of eminent counsel Michael Beloff QC, obtained by the banks, is that these provisions do not satisfy the requirement of legal certainty in the European Convention on Human Rights. I do not know whether that is so, but that is a belief, and, as the opinion has been made available to me and others over the months, I am sure the Minister may be able to provide an indication of an answer.
	I welcome too, as do the Citizens Advice Bureaux, not remarkably, the introduction of the ombudsman scheme allowing for better access to justice—and, as the Minister emphasises, without charge to the consumer. That is most important. Since the 1960s, ombudsmen have been gradually dealing with disputes, both in the private and public sector. They have been a great success as an alternative dispute resolution. One of these successes has been the financial services ombudsman, Mr Walter Merricks, and the extension of that scheme to consumer credit—financed by a levy on the licensees, incidentally—builds on proven achievement.
	I would like to raise a matter that has not been referred to by the Minister, perhaps because it emerged just before the general election and has been followed up since. In March 2005, around the time when the Consumer Credit Bill passed through all its stages in the Commons and had its First Reading in this House, just before the election, Her Majesty's Treasury published an important report by Sir Philip Hampton, chairman of Sainsbury's, entitled Reducing Administrative Burdens. It has some significance on the Bill now before us; and I believe that we should be told what that significance is. A key proposal in the Hampton report is to create a new body at the centre of government to co-ordinate the work of consumer protection and local authority trading standards. In July—which your Lordships will appreciate was just after the general election—the Government put out a consultation paper on the Hampton proposals, for which the response period has just expired.
	The Bill assumes that the well established Office of Fair Trading, for which I have a certain regard, will continue to be the licensing and enforcement body, as it has been since the Consumer Credit Act 1974, when it has worked in close harmony with local authority trading standards officers. But I am worried that on two counts the Hampton report creates great uncertainty, in saying that although the new consumer protection agency could be based within the OFT, it might be preferable to create a new body separate from the OFT's competition responsibilities and therefore,
	"wholly focused on this major task",
	as the consultation paper says. That seems to be the favoured proposition of the Government's consultation paper. But then a mere footnote on page 65 of the Hampton report says that the Government may want to consider,
	"whether the consumer credit functions of the OFT should pass to the Financial Services Authority".
	Nobody else has mentioned that—it was not mentioned by the Minister today.
	I am not at all sure that it is desirable to separate the consumer protection functions of the OFT from its competition policy functions, and the Hampton report is clearly in two minds about that because it talks of the need for strong linkages between consumer and competition policy. Further, it is a new complexity to this House's consideration of the Bill that instead of assuming that the consumer credit licensing powers as amended by the Bill will remain in the experienced hands of the OFT, it may be transferred to that super-regulator, the Financial Services Authority, with its vast-ranging other responsibilities.
	I hope that I am not being awkward in asking the Minister whether he can throw light on those responsibilities. I realise that I am perhaps placing a burden on the Advocate General for Scotland whom I welcome in giving her maiden speech in this debate, but this is an important issue and I hope that we can consider it.

Lord Freeman: My Lords, it is with some trepidation that I follow the noble Lord, Lord Borrie, because he probably has more experience than many noble Lords in these matters, not only through his distinguished service with the OFT but in consumer credit matters generally. I warmly join him in congratulating my noble friend Lord Mawhinney on his most excellent maiden speech. In another place, he had responsibilities placed on his shoulders that normal mortals would have found extremely difficult to discharge. He did so with great distinction and great good humour and all of us, particularly noble Lords on this side of the House, welcome him most warmly. His light-touch, thoughtful and pithy style will be much welcomed in your Lordships' House.
	My only qualifications for participating in this debate is to be one of a long line of former Ministers from the other place who had responsibility—briefly, for two years—for deregulation. I want to concentrate on and follow some of the points that the noble Lord, Lord Borrie, made. I am clear that the Bill should be welcomed as a whole. Clearly your Lordships, following convention, will welcome its Second Reading, but the devil is of course in the detail. I want to flag up some areas that I hope your Lordships will look at in Grand Committee—as I understand it will be if your Lordships so decide.
	In opening, the noble Lord, Lord Sainsbury, said that he and the Government wished there to be a fair, clear and competitive credit market. The noble Lord is right and the whole House would agree with him. The question is how those great principles are applied in the Bill. I would like to follow the noble Lord, Lord Borrie, in considering some aspects of the Bill in the light of Philip Hampton's excellent report, which I hope that some of your Lordships will have had the chance to read. It was published for the Treasury in March 2005 and, as the noble Lord, Lord Borrie, said, is called Reducing Administrative Burdens: Effective Inspection and Enforcement.
	A survey shows that businesses generally are concerned about the cumulative burden of regulation. The estimates, which I have not heard challenged by the Government, are that the costs of regulation per annum vary between £20 billion and £40 billion—a staggering sum. To put that figure in statistics that your Lordships might better comprehend, David Arculus, the excellent chairman of the Better Regulation Task Force, commented in his report of March this year that if the Government could cut administrative costs of regulation on businesses in the United Kingdom, there could be a gain of about 1 per cent per annum of the GDP. That is a staggering sum and I believe that David Arculus is correct.
	There are three tests we should use in analysing not only the Bill as a whole but some of its detail, which we can come to in Committee. First, are the intrusion and the costs of regulatory burden minimised? I accept what the right reverend Prelate the Bishop of Worcester said; I agree with him and the Minister that this is a legitimate area for legislation, but it is also legitimate for the House to question exactly what the burden is on the supplier of credit as well as dealing with the fairness of the way in which industry conducts its business with the demanders of credit.
	I am not convinced that Clause 38, which gives a broad responsibility to the OFT, meets that test. We will need to return to it in some detail in Committee. The powers of the OFT need to be clear and much more limited than they are enshrined in the present clause. Your Lordships might be interested if I quote Philip Hampton on burdens. He was talking about risk and how the important principle is for a regulator to look at where the risk is and not seek to legislate for all aspects of business. In his report, he said that,
	"risk assessment is not being implemented as thoroughly and comprehensively as it should be"
	by regulators in the United Kingdom. He came up with a recommendation that:
	"Comprehensive risk assessment should be the foundation of all regulators' enforcement programmes".
	If the OFT will be responsible for the years to come in administering the respective legislation it is important that it follows that principle.
	Secondly, is a level playing field maintained between the protection of the consumer and the profitability of the supplier? The noble Lord, Lord Sainsbury, spoke approvingly of that principle and I agree with him: he is right. The right reverend Prelate implicitly supported the principles of Clause 19, which deals with the unfair relationship between the supplier and the consumer of credit. But I agreed my noble friend Lord Mawhinney when he suggested that in Committee we should look at what that clause actually means. I am not satisfied that it meets the level playing field test. It needs further work and further clarity.
	The final test relates to something to which the noble Lord, Lord Borrie, referred. Does this legislation impede or permit the future consolidation of regulators, as Philip Hampton recommended? One option in his report was that both the OFT and the Financial Services Authority should cede powers to a new regulator, the consumer and trading standards agency. I join the noble Lord, Lord Borrie, in asking the Minister to confirm the timetable for the consolidation of regulators, particularly in the consumer credit field. Is it true that we are still looking at April 2009, which seems a long time away? I know that some senior people in the OFT are nervous about the OFT ceding responsibility to a new agency on the grounds that it could produce a worse situation—one that was more bureaucratic and less flexible. However, I was not entirely convinced by some of the comments made by the noble Lord, Lord Borrie. We need to look with a sceptical eye at whether it would not be better to cease the functions of the OFT and that part of the FSA's responsibilities for consumer credit, and establish one regulator in place of a number of them.
	I conclude by echoing the comments of my noble friend Lady Miller. The noble and learned Baroness, Lady Clark of Calton, will be making her maiden speech and I am sure that she will deal with the debate in her normal courteous style. Last time I participated in a debate in this House, the noble Baroness, Lady Royall of Blaisdon, also made her maiden speech, which was a cracker of a winding up speech.

Lord Beaumont of Whitley: My Lords, I should apologise to your Lordships for putting my name down to speak on this subject, because, I am afraid, I have little expertise in it. One reason for that is that I have been fortunate enough in my life never to have had to get into debt, and I am appalled by the right reverend Prelate the Bishop of Worcester telling me that I probably will be unable to get into debt in the future. As a result, I am more than usually grateful to the Minister for the thorough and clear way that he explained what the Bill is about. I also congratulate the noble Lord, Lord Mawhinney, on his maiden speech, not least because it will enable him to help me complete my education when we examine the Bill in Committee and during subsequent stages.
	I suppose I should commiserate with the noble and learned Baroness, Lady Clark, because no one will be able to speak after her and tell her how well she did. I am sure that we will all do so in the bar afterwards, if she allows us to, but we all have to tell her how well she is going to speak before having what will undoubtedly be that proof.
	I have sat in this Chamber for 30-odd years and if I were putting together a small anthology of the best speeches from the Bishops' Benches, I would say that they were always good—in both senses of the term: both right and almost always good. I seldom hear a bad speech from those Benches, but the number that plunge deeply into the ethical depths of the Christian religion are few, and I think that we heard such a speech today. I entirely agree with parts of that speech, and welcome it as something new for me to take on board.
	The reason for putting my name down today is to deal with the questions of caps and ceilings on interest rates. It is obviously a fraught issue. I have fortunately had the briefing from the National Association of Citizens Advice Bureaux, as have some of your Lordships, which I take extremely seriously. I have not had the benefit of the opposing briefing on this point, but no doubt we will be able to look at it in Committee and thrash it out there. At the moment I am persuaded by NACAB. It argues a counter-intuitive case, because the obvious reaction of NACAB, myself, the right reverend Prelate the Bishop of Worcester, and probably of the rest of your Lordships, would be that caps must be a good thing to protect the poor and the consumer. Yet there is a forceful case for the disadvantages of interfering with the operation of the capitalist market. I do not spend my time coming to the defence of the capitalist system, nor does the Green Party. Here, however, there is a considerable case for saying "let the market work"—there is always a good case for saying that. NACAB makes the case that rate ceilings restrict the range and diversity of credit products available, and also that some lenders withdraw from the credit market altogether when a rate ceiling is introduced.
	This is not the moment to dwell on that, because it will come up in Committee and, as is usually the case, we will probably argue the subject into the ground. I thought to warn your Lordships that a beginner in this field would be intervening. I am glad that I put my name down, or I would not have had the good fortune to listen to two or three outstanding speeches this evening.

Lord Harrison: My Lords, I apologise to the Front Benches as I was unfortunately detained coming into London before their opening addresses. I offer my warmest congratulations to the noble Lord, Lord Mawhinney, whose hinterland I know extends to Association Football. I look forward to the maiden speech of my noble and learned friend Lady Clark of Calton; I know it will be brilliant in exposition and delivery.
	I also apologise on behalf of my noble friend Lady Thomas of Walliswood, who is the chairman of Sub-Committee G of the European Union Committee. She is unfortunately indisposed today, but had hoped to speak in this debate and was anxious for your Lordships to know that Sub-Committee G has itself completed an interim report, published on 27 July this year, on the proposal from the European Commission for an EU directive on the harmonisation of consumer credit.
	In that report we drew attention, mainly on UK evidence alone, to the rapid growth in consumer credit and the proliferation of new credit products; the steep rise in indebtedness; aggressive competition between lenders, leading sometimes to reckless lending and the mis-selling of products; heavy-handed debt recovery practices; the need for clearer consumer-friendly information about lending terms and conditions; and the need for better protection for disadvantaged consumers.
	That inquiry has now been suspended, but we have had notice that the Commission is now bringing forward a revised directive, and we will continue with our inquiry as a result. As I said, the Commission has modified its position, but as yet we do not know whether the threat that the Commission may want to introduce EU-wide harmonisation of consumer credit has receded. But I say to my noble friend that, whatever the response of government, we hope that the EU directive does not weaken the scope and effectiveness of UK domestic consumer credit legislation, that it still offers the protection currently enjoyed by British consumers, and that it will not constrain the capacity of future governments to respond rapidly and flexibly to developments in the domestic consumer credit market which might not necessarily be replicated elsewhere in the EU.
	In concluding, I ask my noble friend whether the Government have had any first thoughts on the revised EU proposal for the consumer credit directive and whether current UK legislation might offer a model to the European Union upon which it can progress further thinking.

Lord Razzall: My Lords, in responding from the Liberal Democrat Benches, I want to say, first, how much I welcome the tradition set by the Minister during his time in office and the fact that a harmonious debate on these matters has been fulfilled once more.
	In welcoming the maiden speech of the noble Lord, Lord Mawhinney, perhaps I may say how much I agreed with the remarks of the noble Lord, Lord Borrie. How good it is to see a former senior Minister playing a key role in the important deliberations of this House—would that more of his former colleagues on all sides of the House would do the same. I also welcome him today to the rather exclusive club of Members of your Lordships' House who, at times, have held responsibility for the electoral fortunes of their party. I welcome him to the club of which, in this debate, he and I share the privilege of being the only two.

Lord Beaumont of Whitley: My Lords, and me.

Lord Razzall: My Lords, I apologise to the noble Lord, Lord Beaumont, who has shared the opportunity to grace the electoral chances of his party with more than one party in recent times.
	So far as concerns the noble and learned Baroness, Lady Clark of Calton, it is difficult for those of us who have not yet heard her maiden speech to congratulate her in advance. However, if the reputation with which she comes to this House is, as I know it will be, replicated in her maiden speech, then early congratulations are not premature.
	From these Benches, as right across the House, we welcome the Bill. I think it is more than 30 years since there was last a consumer credit Bill, and the Government—or those responsible—are to be congratulated on the timetabling. Having just lost the Bill when the election was called, they have fought their corner to include it early in the current government programme.
	Clearly, in the 30 years since the previous legislation was enacted, as noble Lords have indicated, there has been a massive explosion of credit. That may be regretted in certain quarters, but it is worth indicating, and reflecting on, the fact that credit has meant a significant improvement in the standard of living of a lot of people. The right reverend Prelate the Bishop of Worcester might reflect on whether the world is a better place since the days when people had to save to have a fridge or washing machine—white goods that we all regard as an essential part of everyday life—because people can use credit to have a standard of living that they might not otherwise be able to achieve. It is easy to criticise the actions of credit card companies and lenders, and of course I share that criticism. However, we should not ignore the serious benefits to society—particularly those less well off—of properly managed credit.
	That leads us to the real issue: what is properly managed credit? Clearly, nobody wants to live in a world in which people take on liabilities that they cannot afford, with the financial tragedies that often result. The first issue—on which I think the Government have the almost unanimous approval of your Lordships, and the general consensus seems to be in support of the Government's position—is whether we should cap interest rates. There has been a very effective campaign led, although not exclusively, by the Reverend Paul Nicholson. We have all been subjected to lobbying from that quarter over the months.
	From these Benches, I detect that the general opinion of your Lordships is that it would not be correct to impose that credit cap. The Bill is correct in that. Most of us accept the evidence from the National Association of Citizens Advice Bureaux and others that the imposition of interest rate ceilings can exclude high-risk borrowers from the licensed commercial credit market. That is a rather pompous way of saying that if we imposed interest rate caps a lot of people would fall into the hands of unscrupulous moneylenders whose methods of collection would not commend themselves to your Lordships' House.
	Having said that we support the Bill, that does not mean that we do not have concerns. My party and the other opposition party raised a number of concerns as the Bill went through the other place. The first is over the new powers being given to the Office of Fair Trading. There is a concern that it will effectively be able to create new law simply by issuing guidance. A number of the provisions and powers given to the OFT under this legislation are quite draconian. I can do no better than repeat the words of my friend Norman Lamb, a Member of Parliament in another place on Third Reading:
	"There needs to be a legislative framework for the exercise of these onerous powers; unfettered discretion is dangerous".—[Official Report, Commons, 14/6/05; col. 1006.]
	We will be looking to put guidance for the Office of Fair Trading's exercise of these powers into the Bill.
	The second concern, which other noble Lords have touched upon, is with the definition of "unfairness". I am sure that we will have another go at the question of defining "unfair relationships" in Committee. In another place, the Government resisted an attempt to define "unfair relationships". Those of us who have either been, or have access to, lawyers, can spend a lot of time asking whether we are treating this as a definition under the Unfair Terms in Consumer Contract Regulations 1999; or whether we are going to go back to the definition of the noble and learned Lord, Lord Bingham of Cornhill, in The Director-general of Fair Trading v First National Bank in 2001; or whether we are going to simply say that it is a matter for the courts.
	The problem with saying that it is a matter for the courts is that it will take a considerable period of time for a body of precedent to be established to provide a definition of an unfair relationship. I know the other side's argument, and the arguments are finely balanced. The Government will say, as they said in another place, that we do not know how the definition of unfairness is going to develop in the years ahead. But we will be arguing that there is no reason why the Government cannot take regulatory powers to provide a definition of an unfair relationship and amend it as we go through the next decade. We will be arguing for that in Committee.
	There are other issues on which we were unsatisfied with the Government's proposals as the Bill passed through another place. The first is the question of data. The Minister touched on it in his remarks. There is an issue regarding the capture and dissemination of data in pre-1999—or pre-1998, I forget which—agreements. The Government's position appears to be that it is a serious issue and that extensive consultation needs to take place before they can bring in regulations or legislation to deal with it. The problem with that approach is that legislative time is precious. We have not had a consumer credit Bill for 30 years. If this is a serious issue, what powers do the Government think they will have to deal with the issue? Do they think that they would require primary legislation? If so, how will they find the legislative time to bring it in? If we are going to spend time dealing with this issue, which we would all welcome, is it not possible for the relevant consultation with the industry and government departments to take place before we get there?
	The next two points are rather technical, but they are important. We are concerned that they have been omitted from the Bill. The first is the calculation of interest. I think I am right that we are unique among western democracies in regarding the statement of the APR on any credit card statement as requisite to tell people the interest they are paying. I think I am also right that virtually every card company calculates the APR in a different way. This is a serious concern. If we are going to legislate once in 30 years and have it enshrined for the next 30 years, could we not deal with the question of greater transparency on the calculation of the interest rate paid on credit cards?
	The second point is again quite technical, but it affects a lot of people. It concerns the issue of cheques to credit card holders. There is a lot of misunderstanding and a lack of transparency here. People do not appreciate that cheques are treated by most credit card companies as credit card transactions at a different rate of interest that kicks in on the day the cheque is written. We want to probe that area and see whether the Bill can be improved.
	Finally, a technical issue has been presented to those of us who have been lobbied by banking and lending organisations. It is also a question of principle. It is the issue of retrospection with regard to unfair relationship provisions. I do not want to give any noble Lords who may be expert on the subject a lecture on how the securitisation of mortgage lending works. Yet securitisation is a significant issue in the provision of proper competition between the traditional lending banks and building societies and other lenders. There, a collection of financial mortgage instruments is taken together, often financed from overseas, to provide more funding for the mortgage market. The industry is significantly concerned with the issue of unfair relationship provisions, and the proposal that those should be introduced retrospectively. The DTI originally suggested, in a policy statement communicated to lenders in February 2004, that the provisions dealing with unfairness would be applied in any forthcoming legislation to all existing agreements, but that lenders would have no financial liability in respect to actions taken before the law was changed.
	As the Minister will be aware, there is considerable concern that the Bill as currently drafted reverses that policy decision by the DTI. We will certainly wish to address that issue from these Benches in Committee, and looking at the eager anticipation on the faces of the Conservative opposition, I detect that they might support us on that.

Lord De Mauley: My Lords, I begin by thanking all those noble Lords who have spoken so eloquently today. In particular, I welcome and congratulate my noble friend Lord Mawhinney on his excellent maiden speech and I much look forward to the maiden speech of the noble and learned Baroness, Lady Clark of Calton. I join my noble friend in congratulating her in advance, not only on her maiden speech but also on her arrival on the Government Front Bench and on her position as Advocate General for Scotland. Both the noble Lord and the noble and learned Baroness will make knowledgeable contributions to the House that will add to the quality of debate generally, and in particular on this Bill.
	I also humbly suggest that the relatively small number of speakers in the debate is more than compensated by the high quality of their contributions. That is what one would expect of such high-calibre speakers. Following them is enough to fill the inexperienced speaker with trepidation.
	As my noble friend Lady Miller has made clear, we on these Benches recognise the need for the Bill and its commendable updating of the legislation in the consumer credit sector. There is a commonality of interests between borrowers and lenders, because without the one the other cannot exist. Whatever amendments we do propose in due course will be balanced between those interests.
	Before going further, I must declare interests both as a director and controlling shareholder of a small business which holds a consumer credit licence, and as a former director of two merchant banks—and, in those days, an adviser to their clearing bank parents which engaged in the consumer credit business.
	I turn to our concerns with the Bill. Our over-riding concern is perhaps with the lack of detail in the Bill. We feel that too many significant policy areas have been left to secondary legislation and guidance from the OFT—an agency over which the Government have no ministerial control, in an area where it is also the regulator. As a result, there is a danger that it may become both judge and jury. That will create uncertainty for business and consumers. Like several organisations on the lending side, Credit Action—a national charity committed to helping people manage their money better—has told us that it too envisages problems arising through this lack of clear definition. As my noble friend Lady Miller of Hendon said, at the very least we need to see the secondary legislation being subject to the affirmative procedure, and the OFT's guidance being subject to oversight by the Secretary of State.
	While a major criticism of the Consumer Credit Act is that it fails to provide the OFT with sufficient powers to tackle improper or unfair conduct by consumer credit businesses, we are concerned that the Bill, by contrast, goes too far. It expects the OFT effectively both to make law and to enforce it, yet there is no right of appeal.
	The Joint Committee on Human Rights specifically expressed concerns about the OFT's proposed powers to impose requirements on licence holders where it is "dissatisfied" and concluded that,
	"the unfettered scope of this power fails to satisfy the requirements of reasonable legal certainty and risks the disproportionate use of the power in practice".
	The noble Lord, Lord Borrie, referred to the Hampton report and its suggestions for alternative regulators to the OFT. We think that the interests of all sides are best protected if the OFT is given a set of ground rules. The noble Lord, Lord Razzall, referred to a legislative framework within which it can carry out those functions. We look forward to hearing how the Government plan to deal with that.
	I now move to the concept of unfair relationships, with the general idea of which we concur, as my noble friend Lady Miller said. Our concern, like that of the noble Lord, Lord Razzall, is that the provisions fail to provide legal certainty about whether a relationship is unfair. We feel that both lenders and borrowers would benefit from greater certainty. Furthermore, as the burden of proof is placed on the lender, it appears that every relationship will be deemed unfair until the contrary is proved. The DTI originally suggested that where the contract was clear and the consumer had not been misled, the burden of proof would switch in favour of the lender. We need to understand why that was dropped.
	As a separate but related matter, retrospective application of the new unfair relationship provisions after a one-year transitional period is potentially detrimental to lenders who have securitised credit agreements, who may find them adversely affected. The intended targets of retrospective application are, we understand, loan sharks, who will tend to operate outside the regulatory framework anyway and tend to take advantage of vulnerable customers. We therefore need to know the justification for retrospective application.
	We have concerns about the use of what are known as typical rates. Loans, in particular, are often advertised at such typical rates, where it is permitted that up to one-third of customers may receive a different rate from that advertised. There is concern that customers do not realise that they may not receive the advertised loan rate when they apply. We want provisions in the Bill to require lenders who advertise typical rates to obtain the explicit agreement of the consumer to the rate that they are actually being offered before proceeding with the application.
	Many UK card providers currently allocate payments to outstanding balances at the lowest rate of interest, leaving items such as purchases and cash advances to continue to accrue interest at significantly higher rates. Customers who cannot pay off the full balance on their cards may run up bigger debts than they expected because any money that they pay towards their debt will go towards lower-interest balances. We suggest that the Bill would be an appropriate place to right that wrong.
	We join other noble Lords who have said that they feel that the Bill offers an opportunity as yet not taken to take the heat out of the ballooning levels of personal debt by outlawing unsolicited offers of credit cards, unsolicited increases in credit limits and unsolicited credit card convenience cheques. Those mechanisms are often aimed at a poorer, less financially experienced and more vulnerable people and can lead to them unwittingly running up debt that they did not intend to.
	In the area of data sharing, a critical issue, as the Minister mentioned, is that of older, longer-running credit agreements put in place prior to the enactment of the Data Protection Act, which therefore did not include authorisation by the borrower to the lender to share data as required. We look forward to hearing the Government's explanation of how it is proposed that that problem be resolved. Perhaps the noble Baroness will be able to shed light on the timing of the publication of the results of the work to which the noble Lord referred earlier.
	We welcome in principle the application of the financial services ombudsman scheme to the consumer credit regime. That is, however, subject to certain reservations. Those include that the ombudsman scheme must be fully and appropriately resourced to enable it effectively to take on what may be a large number of complaints relating to much smaller transactions than it currently covers. Noble Lords will be well aware of the proposed EU directive on the matter of consumer credit. We ask how the Government plan to deal with conflicts between it and the Bill, such as the fact that the directive is intended to reintroduce a ceiling for borrowing that the Bill will have just removed for personal borrowing; and for their assurance that there will be no gold-plating. We also specifically ask the Government to demonstrate how they have verified that the move under Article 30 of the directive from minimum to maximum harmonisation is not breached by the Bill or the Act.
	It is perhaps disappointing that the Bill does not reform the outdated and inflexible law on hire purchase and, in particular, the half rule. That seems illogical as the 1974 Act, which this Bill specifically sets out to update, encompasses hire purchase. The half rule allows the customer to hand back a vehicle and be liable for only half the amount otherwise payable. Inevitably, there is a stage during each contract when, if the customer were to exercise its right, that would result in a certain loss to the provider of the finance. That will be made worse under the Bill because it abolishes the lending ceiling for personal borrowers. However, the real loser will be the customer, who will find hire purchase facilities more difficult to come by.
	As regards the timetable for implementation, the majority of the detailed provisions of the Bill are to be made by order, or through the OFT by guidance, notice or clarification. That creates uncertainty for lenders who require sufficient notice for implementation given the scale of the changes that will be required to their processes and IT systems. Therefore, we seek the Government's assurance that commencement dates will allow for sufficient consultation of the outstanding detail of the Bill and adequate lead time for implementation.
	In conclusion, law of this type is often examined only in terms of its impact on lenders. It is usually assumed that the effect for consumers will be without exception beneficial. That is not necessarily the case. If legitimate lenders find that more and more claims are being made against them, or that the OFT's new bureaucratic requirements end up costing them far more than the current system, there will be a knock-on adverse effect for consumers. The most likely outcome is that certain groups of consumers—those on the lowest incomes—will find it far harder to get credit and could even end up going to illegal lenders and, in addition, the cost of credit could rise. We look forward to hearing how the Government plan to tackle these complex issues.

Baroness Clark of Calton: My Lords, I have listened with great attention to the many expert contributions that have been made in this interesting and constructive debate. The contributions came fast, but not furious, and I shall respond in that spirit. I want to associate myself with the tributes paid to the noble Lord, Lord Mawhinney, for his most useful analysis and comments in his maiden speech. Noble Lords tell me that my speech has been much anticipated—it may have been much anticipated by Members but it has not been much anticipated by me. I understand now why it has been so anticipated: some Members think it is the Lord Advocate who is to reply and we know from the days when the noble and learned Lord, Lord Mackay of Clashfern, was Lord Advocate, that that would indeed be something worth waiting for. Since 1999, the Lord Advocate and the Solicitor-General for Scotland have not been UK law officers, as they have gone to lend their expertise to the Scottish Executive. They are Members of the Scottish Executive and the Lord Advocate was replaced by the Advocate-General for Scotland. So it is as Advocate-General for Scotland that I appear today.
	Some 30 years have passed since I first studied the Consumer Credit Act 1974, prior to my Bar examinations in the Faculty of Advocates. To my great relief at the time, I found that I did not have to answer any questions on that legislation. I hope this, my maiden speech, will not turn into a long-postponed oral examination as I attempt to deal with some of the general issues raised by noble Lords arising out of the provisions in this Bill.
	As it is my maiden speech, I hope noble Lords will grant me some indulgence. I am encouraged in that hope by the warmth of the welcome and the generous help that I have received not only from noble Lords but also from so many officials and staff. I am also very grateful for the kind words that have been said about me by so many noble Lords and I hope that my speech does not disappoint their high expectations.
	I have appeared in front of some of my noble and learned Lords on previous occasions, both on the Judicial Committee of this House and the Select Committee on Privileges, but on these occasions I was clad in wig and gown, which provided some measure of protection and disguise. I did not realise that I would feel so unprotected and exposed as I stand at this Dispatch Box. I think it is not noble Lords' indulgence that I crave, but invisibility and, preferably, escape. Unfortunately, I can find no procedural device in the Companion to the Standing Orders to achieve that, and so, I regret, I must continue.
	The office of Advocate General for Scotland, which I established in 1999 and for which I was, until recently, held responsible in the other place, was described by a noble Lord, in the course of the Scotland Act debates as a "bed of nails". One of my legal colleagues described the office as a "poisoned chalice". It is true that I have had some sleepless nights and I have certainly avoided drinking from chalices. Overall, the duties and work of the office have been fascinating and intellectually stimulating. I am sure that will continue to be the case in this House.
	Turning to the Bill, I can offer some relevant experience. The need for improved consumer protection became obvious during my work, many years ago, as a law lecturer in a Dundee law centre, and more recently, in trying to help my former constituents in Edinburgh Pentlands. I consider it a privilege to be able to assist with this Bill, which covers reserved issues under the Scotland Act. The Bill therefore extends to Scotland and is intended to apply throughout the United Kingdom.
	The Government are very grateful for the support the Bill has received from all parts of the House today, and that support will make my task easier. I know that the Bill will receive a high level of detailed and expert scrutiny in Committee, but I would like to respond briefly, in this winding-up, to a number of important general issues that have been raised by noble Lords today.
	First, I would like to deal with the unfairness test. This was raised by a number of noble Lords: the noble Baroness, Lady Miller of Hendon, the Opposition spokesperson; the noble Lord, Lord Mawhinney; and the noble Lord, Lord Razzall. We in Government have considered the new unfair relationship test very carefully and have explored its implications. It is important that the test does not constrain or impede the courts' ability to make a fair and unbiased judgement in each case. That is why we have taken the decision not to define an "unfair relationship". Lenders are already familiar with the concept of fairness. It is a standard used by the Financial Services Authority industry codes and the rules on unfair contract terms.
	I am grateful, in particular, for the support of the right reverend Prelate in this matter, and the general support of the noble Lord, Lord Borrie, on the main points. The test will not exist in a vacuum: it will operate in the context of existing laws and case law. The Government want a test with a lower threshold for challenge, a test which makes it clear that the court can consider all relevant circumstances. The danger in trying to define, or provide examples of, an unfair relationship is that it risks limiting the scope of the new test. There is also a defect in the current test, which requires the credit bargain to be "extortionate", as defined, quite specifically, in the 1974 Act. That test is a hurdle which is far too high. Few consumers have commenced actions under the existing test, and even fewer have been successful. The new unfairness test is general, in order that it can catch all unfair relationships. The new test is designed to encourage credit providers to adhere to the spirit of the Act, and not merely comply with technical requirements. This is not a checklist. All lenders should ask whether what they are doing is unfair. If the court finds that there is an unfair relationship, it has the discretion to impose a remedy, for example, altering the terms of the agreement, or setting aside all or part of the agreement. I regret to say that I must disagree with the noble Lord on the Opposition Front Bench about when the agreements should be caught by the new test. Some of the agreements are extremely long—15 or 20 years—and we cannot wait that long to protect consumers.
	My noble friend Lord Borrie made an interesting contribution on human rights. The Government were provided with a copy of the opinion of Mr Beloff QC on the compliance of the unfair relationship provisions with the ECHR. The Government believe that the provisions are compliant with the ECHR, and the Minister has made a statement to that effect. I am pleased that the Joint Committee on Human Rights, which reported today, appears to support the Government's position. According to its report, the committee also considered the legal opinion of Michael Beloff QC and Andrew Hunter before reaching its view. It concludes:
	"In our view, therefore, although further guidance as to the meaning of 'unfair' in this context might be desirable, the absence of such guidance does not render the unfair credit relationship provisions in the Bill incompatible with Article 1 Protocol 1 ECHR".
	It is plain from the debate that all Members of the House share the concern about vulnerable consumers. We may have different ways of dealing with it, but it is a big concern. The Government are certainly concerned about it. Obviously, the vulnerability can arise in many different ways. We have heard examples today. Those most at risk may suffer particularly from inadequate information, leading to inappropriate financial decisions. They may also be more at risk of exclusion from services. The Government have taken many initiatives, apart from the Bill, that will help to support vulnerable people—for example, the over-indebtedness action plan. Various statutory instruments were made in summer 2004 to increase the transparency of credit agreements and help consumers to make better financial decisions. Several noble Lords commented on that. The Bill will add to those initiatives and provide much greater protection for consumers. It will be of particular help to the most vulnerable.
	The Government are also grateful for support in the debate on interest rate ceilings. I think that the right reverend Prelate raised that matter, and the noble Lord, Lord Beaumont of Whitley, I think, gave support for which we are grateful. The Government are following the general trend of the debate and are of the view that the research indicates that it is not appropriate to introduce an interest rate ceiling in the UK. Noble Lords may be aware that detailed research into such matters has been carried out by Policis, including comparative work in other countries.
	The Government are not convinced that introducing interest rate ceilings will help the consumers that they are supposed to protect. For example, Policis found that, where there are interest rate ceilings, lenders either do not provide small loans repayable over a short period or they offer products that have extra charges not included in the interest rate calculation. As a result, interest rate ceilings could exclude some vulnerable low-income consumers from the market, forcing them to use inappropriate products, take out larger loans than they need or even go outside the regulated market.
	There is an issue about the burden on business. There must be a balance between protecting consumers and putting extra work on businesses. However, the Government have worked hard to ensure that the Bill balances those interests. Those interests are not always in competition; it is also in the interests of business to have fair competition. As a Government, we have consulted all interested parties extensively, including representatives of those active in the consumer credit business. We have endeavoured to balance the requirements of consumer protection with the need for business flexibility.
	On post-contract information, we have tried to ensure that the required information is necessary and can be combined with other information where appropriate. We are setting a minimum standard for information provision, and business is free to do that in the most cost-effective way. Many credit providers already provide such information to their customers.
	We are also endeavouring to deal with the issue of irresponsible lending and we are doing so in a number of ways. One way is the introduction of the new fitness test. This will help the OFT to identify and clamp down on irresponsible lenders. It will be able to look at any evidence of irresponsible lending when assessing a lender's fitness to hold a consumer credit licence. In order to ensure that this is clear to businesses, the OFT will issue guidance on the kind of issues that it will look at when considering fitness.
	It is perhaps worth remembering that the OFT was established as an independent body by an Act of Parliament and its powers were largely defined by the Enterprise Act 2002. The OFT is subject to parliamentary scrutiny and judicial review in the normal way. The Bill as drafted reflects an extensive period of consultation with both consumers and industry about the powers to be granted to the OFT to ensure that they are appropriate and proportionate.
	We have balanced these additional powers with important safeguards to ensure that the OFT exercises its powers reasonably. For example, it will have to give reasons for requesting information; give reasons and notice before accessing premises; warrants may be obtained only from magistrates; and the court process contains built-in safeguards against abuse. In addition the OFT must issue guidance and it must consult. We have built in many safeguards.
	A number of separate issues have been raised. I shall not be able to deal with all of them in detail but I hope to deal with the majority. The noble Lord, Lord Borrie, asked for an explanation about Part 8 of the Enterprise Act. I share some of his difficulties. Paragraph 51 of the Explanatory Notes gives some explanation but, in general terms, under the powers of Part 8 of the Enterprise Act 2002, the OFT will be able to take enforcement action, including taking lenders to court, where unfair relationships affect consumers generally. This could be, for example, where a lender uses standard terms or operates in a common manner in respect of borrowers generally so as to make each relationship unfair. The OFT will be required to issue guidance, following consultation, on how it expects to use its powers.
	The noble Baroness, Lady Miller, raised the question of secondary legislation. I understand that the Delegated Powers and Regulatory Reform Committee has considered the Bill and published a report on 13 October this year. The committee has agreed with the Government's proposals for consideration of secondary legislation by Parliament in all but one respect in relation to consequential amendments. We are considering the committee's suggestion in that regard.
	The noble Lord, Lord Mawhinney, raised some very interesting issues. He asked about plastic card fraud, which is a very complicated subject. In general terms, the Government work closely with the finance and retail sectors as well as with the police to combat fraud and take an active role in improving public awareness. From April 2004, the Home Office, with the Corporation of London, has provided significant additional funds to enable the City of London Police to expand its fraud squad. The Home Office has also set up the dedicated cheque and plastic crime unit, which works closely with the banking industry to help prevent organised card fraud. There are also other similar initiatives.
	As to the unsolicited provision of credit cards, limit increases and credit card cheques, the answer to some of these issues is that the Bill is very much concerned with transparency. We do not want to prevent business from marketing its products but we want it to do so responsibly. We want consumers to have clear information about what the credit deal entails. The Government have introduced regulations which impose new standards of transparency in advertising, pre-contract disclosure and agreements. Credit card limits are currently covered by the banking code, which was revised in March this year. The Parliamentary Under-Secretary of State committed to keeping the effectiveness of the code.
	A question was raised by the noble Lords, Lord Borrie and Lord Freeman, about the Hampton report. The Government have accepted Hampton's recommendation to create a Consumer and Trading Standards Agency. We are considering how to implement this recommendation in consultation with business and other stakeholders. A consultation period on the roles and functions of the Consumer and Trading Standards Agency opened in July and closed on 12 October. Stakeholders and other interested parties will now be considering these matters.
	Members will know that the EU Consumer Credit Directive has had a long and difficult passage. Substantial negotiations are to take place, and it is not at all certain what a final proposal may look like. The provisions in the Bill are important responses to the problem that we encounter in the UK. We cannot afford to wait for a directive that may not be agreed for many years, and we do not know what form it will take, but we are certainly considering the latest draft of the directive.
	The consumer credit market has changed a great deal during the past 30 years. Far more consumers are using credit and far more businesses are providing it, but the legislation designed to support this important sector and protect its consumers has not been adapted accordingly. Parts of the 1974 Act are no longer appropriate to the current environment and the potential dangers of credit for consumers have become more acute. Reform is long overdue: I think we agree about that. The Government have made significant progress in this area, but there is still more to do. The Bill will take further, important steps towards a fair, clear and competitive consumer credit market for the 21st century. It will give regulators the powers they need to monitor the licensing of consumer credit businesses more effectively and proportionately; it will give consumers the protections they need by providing them with rights to comprehensive and effective means of redress; and it will give consumer credit businesses the confidence they need to operate fairly in a competitive market.
	On Question, Bill read a second time, and committed to a Grand Committee.

House adjourned at eighteen minutes past five o'clock.
	Monday, 24 October 2005.